Bright Outlook for Global Airlines Clouded by Trade War Fears

Global airlines are gathering for an industry summit boosted by weaker fuel prices, but facing a tough debate over how to share the cost of tackling emissions involved in a trade row.

The International Air Transport Association, which represents 240 carriers, is holding its annual meeting against a backdrop of higher traffic and cheaper energy that could lift airline profits and unperpin hopes of economic recovery.

Tony Tyler, IATA's director general, said ahead of the June 2-4 talks that airlines felt "modest signs of improvement" as traffic grows sharply in emerging markets, offsetting Europe's debt crisis and a hesitant pick-up in North America.

North Sea Brent crude prices have fallen from a peak of $118 per barrel earlier this year to $100, raising the prospect that IATA will hike its influential profit forecast as airline chiefs meet in Cape Town. Fuel accounts for a third of airline costs.

IATA currently predicts an industry profit of $10.6 billion in 2013 and Tyler said Monday's update would set a "cautiously optimistic" tone for the meeting of 700 aviation executives.

An 18-month slump in cargo showed signs of stabilizing in April. In North America, airlines have managed to keep capacity in check, keeping planes full and ticket prices up.

"The economy has been OK but not robust. Usually (airline) prices ebb and flow with oil and now we see they have some ability to maintain their pricing power," said Basili Alukos, an airlines analyst with Morningstar, based in Chicago.

Overshadowing the discussions will be lingering fears of a trade war as governments remain deadlocked over fuel emissions.

The European Union has pledged to re-introduce a controversial emissions trading scheme opposed by a group of other countries unless everyone can agree on a global system.